Low carbon or new development model?

The last two years have seen a flurry of reports that have projected the long-term greenhouse gas emissions trajectory of India, and how the country can go low-carbon and help solve the climate change crisis. Most of these reports have talked about the huge emissions-saving potential in all sectors of the Indian economy, especially industry and power, and the ease with which we can avoid emissions – some on our own and some with financial help from the developed world through emissions trading. In this hunky-dory world that these reports portray, we reduce emissions, the developed world takes the credit (without reducing its own emissions!) and the world overcomes the climate crisis.

But is the task of reducing emissions in India so simple?

A look at the five most emissions-intensive industrial sectors – steel, cement, aluminium, fertilizers and paper – as well as the power sector, which together accounted for over 60 per cent of India’s carbon dioxide emissions in 2008-09, shows that many of them are actually operating at global best levels.

The Indian cement industry, for instance, is one of the most efficient in the world due to its use of modern technologies and blending materials (flyash and slag) for cement production. Urea plants (the most energy-intensive in the fertilizer sector), especially gas-based ones, are today defining what the sector's global best practices should be. Eighty per cent of the aluminium industry is already using global best smelting technology; the remaining are converting too, as they cannot compete due to high energy costs.

India’s coal-based thermal power plants are actually more efficient than the global average. The country’s biggest power utility, NTPC, operates at 33 per cent efficiency, one of the highest in the world given the sub-critical technology and poor quality coal the company uses. Of course, current efficiency levels are lower than what can be achieved by installing supercritical and ultra-supercritical power plants, but we should not expect miracles from these new technologies either; India’s poor coal quality and high temperature and humidity will always impede efficiency gains.

The sectors that are, and will in future, lag behind are steel and paper, largely because of the raw material and fuel constraints and the characteristics of the industries themselves.

Steel production in India is moving towards the coal-based sponge iron route because of non-availability of coking coal in the country; by 2030, 60 per cent of steel in India will be produced from sponge iron. Sponge iron is not only energy-inefficient and polluting, it also has lower potential to improve efficiency. The developed world has reduced the emissions intensity of steel production by using scrap. We don’t have that luxury because of the ‘high growth-low steel base’ nature of our economy. The technology choice we are making today – coal-based sponge iron – means that the Indian steel industry will remain emissions-intensive even if we use all known and available technologies.

The paper sector is hamstrung by problems of small size, multiplicity of raw materials, technological obsolescence and multi-product nature of plants. The saving grace (so-called) is the decisive shift in raw material – instead of wood, bamboo and agro-residues, more and more paper in India will be produced from wastepaper and market pulp in future. This will reduce the emissions intensity of the industry significantly. But this is akin to outsourcing emissions. The tragedy is, the Indian paper industry can actually become carbon-neutral by sequestering carbon through its social and farm forestry (ITC Ltd. claims to be a carbon-neutral company), but it seems that the sector would rather import wastepaper and market pulp than work with farmers to raise wood.

Considering the present performance of these emissions-intensive sectors, the reactionary consensus in climate change chatter, especially in the developed world, that India’s rising greenhouse gas emissions are in no small part due to the fact that industry and power sectors here are inefficient, is completely off the mark.

But the larger question is the technological future for these sectors. How much more emissions reduction can be achieved by improving technology and management practices?

An 8 per cent GDP growth rate for the next 20 years (which is what the government hopes to achieve) means production in all sectors, other than fertilizers (urea), will grow four-five fold. Steel production is likely to reach 300 million tonnes (MT) in 2030 compared to 60 MT today; production of cement (900 MT), paper (28 MT) and aluminium (6.5 MT) will go up, while power from utilities will rise to about 3,200 terawatt-hours (TWh) compared to 750 TWh today. This means 80 per cent of these industries will be coming up in the next 20 years.

Energy price is a big driver of change, especially in India, where industrial energy cost is one of the highest in the world. In the normal course, therefore, Indian industry will adopt energy-efficient technologies; this is already apparent in all sectors. By 2020, other than power, most sectors in India will operate at best available technique (BAT) levels or what can be practically achieved, considering the characteristics of the industry. In the power sector, everything will depend on how ambitious we are in deploying low carbon / renewable technologies. Cost would be the major factor, as high-end renewable technologies like solar are very expensive today.

The problem is, reducing emissions after 2020 will be a challenge. By 2020, India will exhaust all ‘low hanging’ options as well as high-end commercialized technologies. Post-2020 new, high-cost and not yet commercially available technologies will be required to reduce emissions significantly. It is in this regard that the voluntary commitment of India to reduce emissions intensity of its GDP (excluding the agriculture sector) by 20-25 per cent by 2020 in comparison to the 2005 level, assumes new significance.

The fact is that India’s commitment for 2020 is easy to meet. It will cost, but not enough to be left undoable. The tough part begins after 2020, when the emissions intensity of the sectors starts to stagnate once we cross the current emissions-efficiency-technology threshold. The options are either to change the energy source (from coal to renewables) or develop new revolutionary technologies. Both are theoretical as of now.

By 2030, even if India installs 100,000 MW of solar energy (none of this exists today), 90,000 MW of onshore and offshore wind energy (only 11,000 MW of onshore wind energy currently exists), 50,000 MW of biomass power (1,800 currently), 100,000 MW of hydropower (38,000 currently), 30,000 MW of nuclear power (4,500 currently) and 50,000 MW of gas-based power (18,000 currently), coal will still have to provide close to 60 per cent of the total power generation in the country. After putting together all these options and spending so much, we will still not be able to substantially reduce our dependence on coal. And remember, India also faces the challenge to provide affordable power to massive numbers of people who are still unconnected to the grid.

The bottom line, therefore, is that reducing emissions in an 8 per cent growth trajectory post-2020 is going to be a tough task. This message must go out loud and clear to the developed world, which thinks it can ‘buy’ its way out of the climate crisis by reducing emissions in developing countries. It is for this reason that India (and all other late entrants to the development game) must not give up on their demand for an equity-based global agreement on climate change.

But there is a challenge greater than the international climate politics: can we reverse climate change within the current economic growth model? It is quite clear that there is a limit till which existing technologies will solve the climate crisis. The problem is in most sectors (other than power where we have the option to go no carbon if we invest heavily), no new revolutionary technology is in sight. It is for this reason that I believe the world must reinvent its growth model; a model in which growth is not synonymous to development and consumption to happiness and prosperity.

Always remember: “efficiency is not sufficiency”.

My recent book “Challenge of the new balance”, which analyses these issues, can be accessed at www.cseindia.org.